United Kingdom Monetary Policy

United Kingdom: Bank of England expands its asset purchase programme

October 6, 2011

At its 5-6 October monetary policy meeting, the Bank of England (BoE) left the Bank rate unchanged at 0.50% but increased the size of its asset purchase programme (quantitative easing) by GBP 75 billion, bringing it to a total of GBP 275 billion. The Central Bank's decision to inject extra stimulus into the still sluggish economy surprised the market. The BoE started quantitative easing by purchasing gilts of different maturities in March 2009. In November 2009, it expanded the asset purchase facility by GBP 25 billion, which brought it to a total of GBP 200 billion. According to the minutes released on 19 October, all nine members of the Monetary Policy Committee (MPC) voted to keep rates on hold at 0.50%, as in the previous meeting held in September. In addition, the Committee also unanimously voted to increase the asset purchase programme. The next MPC meeting will be held on 9-10 November. With its decision, the BoE clearly emphasized that it is more concerned about reinvigorating growth in the economy than containing inflation. For the time being, monetary authorities are likely to maintain the policy stimulus, with a majority of Consensus Forecast panellists expecting the BoE to stay put until the end of 2011. However, in 2012, the quantitative easing programme might be extended further if the economy remains sluggish.

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